(Bloomberg) -- The Bank of Russia pushed through its third consecutive interest-rate cut and said more monetary easing is possible at an upcoming meeting as inflation dropped closer to a 4% target.
The benchmark rate was cut to 7% from 7.25%, according to a statement published on Friday. The move to the lowest level since March 2014 was forecast by 33 economists out of 35 in a Bloomberg survey, with one analyst forecasting a bigger cut and one expecting no change.
“If the situation develops in line with the baseline forecast, the Bank of Russia will consider the necessity of a further key rate reduction at one of the upcoming board of directors’ meetings,” the central bank said in a statement.
Bank of Russia Governor Elvira Nabiullina will hold a news conference at 3pm in Moscow.
The central bank renewed its easing cycle in June after a couple of rate hikes last year to stem risks to inflation from a tax rise. Some economists had suggested recent ruble weakness and proposals for an increase in spending may limit easing going forward.
Key Insights
- Inflation is decelerating faster than expected this year, aided by an early harvest and weak consumer demand.
- Economy Minister Maxim (NASDAQ:MXIM) Oreshkin has called for more easing to stimulate growth, which slipped to 0.7% in the first half. He has warned inflation could drop as low as 3% at the beginning of 2020.
- The government plans to accelerate spending on infrastructure projects by the end of this year, which could spur inflation. An additional proposal to spend the liquid part of the country’s national wealth fund has drawn warnings from central bank.
- The ruble has dropped more than 4% since the last rate decision on July 26. Further weakness may stall easing before the end of the year.
- This rate cut was already priced in by bond investors and Russia’s still relatively high real interest rate means it won’t significantly diminish the appeal of ruble bonds.